Abstract This article presents information on a report of the Committee on Accounting Theory Construction and Verification of the American Accounting Association. The process of theory construction and verification has for many years been the subject of analysis from a variety of points of view by scholars interested in the philosophy of science. Only recently has it become a topic for research and discussion in accounting. A theory is, first of all, a set of sentences. Theories are expressed in a language and therefore the study of language is pertinent to the study of theories. Indeed much of the philosophy of science is nothing but a study of language, although it is a study of the language peculiar to the scientist. The inputs to the accounting system are observations made on real world phenomena. The outputs from the accounting system are both empirical and analytic. Only the empirical outputs can be directly verified by independent reference back down to the observation plane. The analytic outputs must somehow be verified through the prediction models and the decision models in which they, along with the empirical outputs, are used. The outputs from prediction models are primarily empirical, although it is possible that some may be analytic. Decision models utilize both empirical and theoretical outputs from both the accounting system and the prediction models.
A Sat, study studied this question.